In this recent Order, the Hon’ble Mr.Justice Krishnan Ramasamy has categorically held that_a person having an interest in the dispute or in the outcome or decision thereof, must not only be ineligible to act as an arbitrator but must also not be eligible to appoint anyone else as an arbitrator.

In this recent Order, the Hon’ble Mr.Justice Krishnan Ramasamy has categorically held that_a person having an interest in the dispute or in the outcome or decision thereof, must not only be ineligible to act as an arbitrator but must also not be eligible to appoint anyone else as an arbitrator.

35. A person who is disqualified from being appointed as an Arbitrator, cannot commence the arbitral proceedings and if he commences any such proceedings where even though both parties have participated and ultimately any award is passed, such award is non est in law and liable to be set aside. Conducting the arbitral proceedings and passing an award by a disqualified person is as good as conducting the proceedings and delivering the judgment by a Kangaroo Court where even both the parties had participated. Law will not recognize any judgment or order passed by Kangaroo Court where the law and justice are disregarded or perverted and the similar logic would apply to a disqualified person who is appointed as an Arbitrator.

36. Absolutely there is no bar for appointing the Arbitrator unilaterally ipso facto prior to the amended provision 12(5) of the Act. What the Section 12(5) insists upon that in the event of unilateral appointment, the consent of the other party should be obtained in writing. Now the issue is at what stage such consent in writing should be obtained from the other party? The stage, in the opinion of this Court is immediately upon receipt of the notice by the other party who is intimated about the appointment of Arbitrator unilaterally. Section 11(5) states that in the event if no agreement for appointment of the Arbitrator is arrived within 30 days from the date of request made by the party who appointed the Arbitrator, the other party can approach the Court, seeking for appointment of Arbitrator. Therefore, in the event of unilateral appointment, this Court is of the considered view that the express agreement in writing in terms of proviso to Section 12(5) should be obtained within 30 days from the date of receipt of notice of appointment of Arbitrator unilaterally. In case no such consent in writing is provided by the other party for the unilateral appointment of the Arbitrator, the recourse available for the party is to approach this Court, seeking for appointment of the Arbitrator. Therefore, if no such consent in writing is provided for the unilateral appointment of the Arbitrator within 30 days, the disqualification as contemplated under Section 12(5) r/w Seventh Schedule comes into effect on expiry of 30 days and when once the disqualification gets attached to the Arbitrator, he cannot perform his duties and commence the arbirtral proceedings. Despite the same, if the proceedings are commenced, it would be non est in law. Even if both parties participated in those proceedings since the proceedings commenced by a disqualified person, the same are rendered in non est in law and if any award is passed by the disqualified Arbitrator, it cannot be sustained and liable to be set aside. In other words, when arbitral proceedings are commenced by a disqualified person, the question of mere participation in the arbitral proceedings by the parties cannot be considered as a waiver. As far as the unilateral appointment of the Arbitrator is concerned, to waive the disqualification attached, is only by way of express agreement in writing by the other party in terms of Section 12(5), which should be obtained in 30 days, otherwise, it would be considered that there is no agreement between the parties for the appointment of Arbitrator unilaterally.  

46. Further, the learned Arbitrator who is well aware than the parties to the agreement about the settled legal position in the matter of unilateral appointment, particularly, the disqualification contemplated under the amended Section 12(5) r/w Schedule VII of the Act, after entering into reference by way of unilateral appointment, at the first hearing itself, before commencing the arbitral proceedings, shall fair enough ensure from the parties whether they are willing to conduct the arbitral proceedings and also insist upon waiver in writing in respect of applicability of Section 12(5) of the Act and in the event any party does not appear despite receipt of notice, he/shall not proceed further and immediately recuse or withdraw from the arbitration. This is a fair practice which every Arbitrator who is appointed unilaterally has to necessarily adopt before commencing the arbitral proceedings and to insist upon express agreement in writing from them and record the minutes accordingly even despite both parties are co-operating to participate in the proceedings, which would certainly save the time and avoid the multiplicity of proceedings, otherwise, the entire proceedings including the award would be rendered as bad in law and become liable to be set aside.

It is settled law that when an authority exercises jurisdiction which does not possess, its decision amounts to a nullity in law. Thus, a decision by an authority having no jurisdiction is non est in law and its invalidity can be set up whenever it is sought to be acted upon. In the present case, by virtue of amended Section 12(5) r/w Seventh Schedule of the Act vis-a-vis landmark judgments of the Hon’ble Apex Court in TRF Ltd. and Perkin cases, the learned Arbitrator, who was appointed unilaterally and incurs disqualification, has become ineligible to be an Arbitrator and the award passed by him, deserves to be set aside, more particularly, as already observed, there is no express waiver in writing as contemplated under the proviso to Section 12(5) of the Act.